Since the 1990s, "higher housing debt has been accompanied by a greater exposure to mortgages by lenders. The housing market has become a significant source of risk for the financial system and the economy."

Differing tax treatment on savings was another top issue, with the inquiry noting that bank deposits and fixed-income securities were taxed at marginal rates whereas salary-sacrificed superannuation was taxed concessionally.

"The unequal tax treatment of savings vehicles distorts the asset composition of household balance sheets and the broader flow of funds in the economy," it said.

With regards to franking, its justification "is less clear than it was in the past", the inquiry said.

Franking created a bias towards investment in domestic equities. Consequently, "dividend imputation may be affecting the development of the domestic corporate bond market".

The inquiry noted that mutuals cannot distribute franking credits, "which could be affecting competition in banking".

The white paper should also discuss the levying of the GST on financial services, the report said.

Because such services were now GST-free, households might be overconsuming such services while businesses might be underconsuming.

The inquiry also recommended:

Research and development tax credits – now available annually – should be available quarterly to alleviate cash-flow constraints.

The tax treatment of venture capital limited partnerships should be simplified.

The different tax outcomes between self-managed superannuation funds and APRA-regulated funds should be investigated.

Outdated and closed financial products – also known as "legacy products" – should be rationalised. The tax treatment of a legacy product upon conversion to a contemporary product remains a stumbling block.

Interest withholding tax might be distorting the funding decisions of financial institutions and placing Australia at a competitive disadvantage internationally.

Social impact bonds – an experimental method of funding social welfare outcomes – could be taxed on a concessional basis to increase investor demand.

Recommendations of the Johnson Report (2010) that have not yet been implemented – including the tax treatment of managed funds – should be considered carefully.